The Indian PC Market on the Rise



Authors: S Ramakrishna,
Research Associate
ICMR (IBS Center for Management Research).

The branded players are having a good time in the personal computer market in Indian. Will they continue to steal the show from the unorganized players?

The year 2004 has been a boom time for the manufacturers of personal computer (PC) from India and abroad, as the market for PCs grew at a much faster pace in comparison with the past. The 34% growth in the Indian PC market last year is the highest growth in the last four years. With this growth, PC manufacturers hope that the Indian PC market is poised to take off. Particularly, branded PC manufacturers have had some successful run in 2004. Moreover, the good news for PC manufacturers is that India is turning out to be a promising market. There are several factors which led to the increase in sales of PCs viz. reduction of customs duty and the increasing usage of computers which led to the continuous fall in prices of PCs. For a long time, computer manufacturing companies across the globe have been quite anxious about the Indian market and now they have been successful in their attempt to convert the Indian Personal Computer market into a profitable zone. Much of the success can be attributed to the astonishing performance of the Branded PC manufacturers.

The Bottom-line

Indian PC market is the fourth largest in the Asia-Pacific region after China, South Korea and Australia. Experts foresee a great business potential for computer manufacturers in India. As a matter of fact, the hardware business in India never really took off. During the late nineties, much was being talked about software development and every company was looking towards software business. Analysts feel that the hardware industry would have been in an even better position had the software industry not overshadowed the entire market. Even the government, stock markets, and businessmen were more inclined towards software instead of concentrating on the hardware business. But things have changed, as the boom in the Information Technology sector is back and there is a rising demand for jobs in that sector. Also, computerization has become a highly essential task for every organization irrespective of its size and nature. Increasing use of PCs in software companies and outsourcing companies, developments in telecom and banking sectors and their foray into rural markets has further prompted the increase in sales of PCs. In addition to all these, computer literacy has become an essential part of education.

The growth in PC market which has been very low over the past four years, has gained momentum in the recent past, particularly in 2004 with sales of PCs touching remarkably high figures. According to an International Data Corporation (IDC) report, the sales of PCs in 2004-05 were 3.6mn, a 33.4% increase from 2.7mn in 2003-04. The increase in sales of PCs this year (2004) can be attributed to two factors: Revision of customs duty by the government & Rising demand. First, the government reduced the customs duty on IT products from 15% to 10% and the excise duty on PCs from 16% to 8%. In the second round of revision, the government totally abolished the excise duty on PCs and also the additional duty of 4%. The price revision would have taken the air out of the local players but in order to leave some scope for healthy competition in the market, the government had to adjust the additional customs duty for PCs which are imported. The demand for PCs has been rising from every corner of the market; particularly, there is an increasing demand from the consumer segment. More so, even, the demand for Notebook computers has increased.

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